Fidelity Investments, a multinational financial services corporation made a rather large, game-changing announcement this month. The firm that manages $7.2 trillion in assets announced the launch of Fidelity Digital Asset Services, a cryptocurrency custody and trading platform for specifically for institutional investors. Fidelity Investment’s strategic move into cryptocurrencies could help the broader financial industry embrace cryptocurrency from an unknown to an emerging, hot asset.
Fidelity is not a small outfit. It administers $7.2 trillion in customer assets, has 27 million customers, and invests $2.5billion on technology alone. Now, part of that investment will be in blockchain and cryptocurrency along with AI. The new digital asset company evolved from the Fidelity Center for Applied Technology, or FCAT as its affectionally known by staff.
The new standalone company will have about 100 employees and will be headquartered in Boston, is in the process of onboarding its first clients now and will be in the market and “generally available” sometime in early 2019.
The main premise of the new company will be to handle custody, or how to safely store digital assets for their largest corporate clients. There are other companies already in this space and established. Crypto companies Coinbase, Gemini (run by the Winklevoss twins), BitGo, Ledger and ItBit are among those already offering or working on equivalent products. The well-known Japanese bank Nomura also announced plans in May to offer crypto custody, and Goldman Sachs and Northern Trust are reportedly exploring custodial services. Typically, US financial institutions have been slow to move into this space.
Fidelity Digital Assets is a bet that Wall Street’s appetite for trading and safeguarding digital currencies will grow. The growth in the global economy, with a bear market coming, is slowly generally so the opportunity to make more money is very appealing to these firms. It also gives the Boston-based firm something bespoke and different as a USP ahead of top Wall Street players such as J. P Morgan who have stayed away from crypto.
Fidelity Digital Assets initially will roll out support for Bitcoin and Ether starting early next year. It will also offer over-the-counter trade execution and order routing.
“Our goal is to make digitally native assets, such as Bitcoin, more accessible to investors,” Fidelity Chief Executive Officer Abigail Johnson said in the statement.
The decision has been quite well timed. With Bitcoin about to celebrate its 10-year birthday this week, they have let the asset class evolve and grow over time. With any new asset class and marketplace, maturity comes when the infrastructure is built, which has really taken off in the last 2 years. Having one of the most well-known investing companies like Fidelity joining the crypto arena is another sign that you should not sleep on Bitcoin as a potential long-term investment.
Back when the may young, embryonic Internet companies in 2000 were going out of business, commentators weren’t saying the internet was never going to happen. The aim will be to focus on the fundamental creation of infrastructure and start to build credibility and trust with the technicals of cryptocurrency and be first to make with a quality investment product.
It may well be that a shift towards Bitcoin being the risk of hedge for institutional clients as volatility across the world remains high with pending trade tensions, currency fluctuations and rising debt corporate and global debt. For a full overview of issues affecting the markets check out our comprehensive article here.
What does this investment mean so much to the industry?
Fidelity is vast with trillions under management. A move and investment like this one is only undertaken, especially in such a volatile unknown industry (relatively) if their clients haven’t requested it. This isn’t a change which happened or a decision made overnight. It follows meticulous research and planning. The fact clients are asking for it in feedback means this mainstream.
This sort of pivot, even for a large company is not taken lightly. These investments are very expensive. This decision paints Bitcoin and cryptocurrency as a serious investment. For understandable reasons, it has been portrayed as a risky, underclass thanks to silk road and the like. With custodian issues addressed by such a trusted name, crypto will attract a whole new client base and market the benefits
Without a doubt, 2019 is set to be the year that changes everything. It won’t be a pump and dump like 2017/18 but a time when western corporate finance and crypto come together. Aside from Fidelity, Intercontinental is set to release its Bakkt futures product before the end of the year and Goldman Sachs has pledged to invest $16 million in BitGo. We wrote about it and you can read it here.
Depending who consult in the industry (the so-called “experts”) you will get a price prediction anywhere between $15,000 and $100,000 by the end of this year to the middle of next year. That seems due to increased volume of trading and liquidity it could one of the more credible predictions. Like oil, the higher the price of the fundamental asset being traded or invested – the more bloated and attractive the industry will be with more meat on the bone
There is the canary down the mine. The tide is starting to change in sentiment and with not only more positivity and credibility with brand Fidelity but more funds will also be invested into cryptocurrency via clients of institutional investors, ensuring a slow change in the appetite for wanting more from cryptocurrency.